Investors vs First-Time Home Buyers

Investors vs First-Time Home Buyers

For the past year and a half or so, my buyers have been plagued by competition by investor-buyers. They seemed to flood the demand-side of the market around the time that we hit bottom. Many seemed to have deep pockets; they were paying cash and had cash for renovation.

Today, I ran across this article. It explains the national trend that underlies what I have been seeing here in “greater Cambridge.” (It is neither accurate nor prudent to assume that what happens nationally in real estate is what will happen locally. However, national trends do color our market.)

The trend is that small investors are buying property for long-term investment. They are lining up to be the future landlords of small properties. Nationally, they are buying single family, foreclosed houses, for rental. From where I sit, I see the long-term investors in the way of my two-family house buyers and some of my condo buyers (depending on the neighborhood.) In the markets I work in, single family houses are too expensive to purchase to make them good rental investments.

The Chicago Tribune article says that NAR data shows that 24 percent of all existing homes sold last year were bought by investors. They are gobbling up the foreclosed houses as rentals; this accounts for a chunk of the foreclosure inventory that has been re-purchased.

Kevin Hommel, director of finance and administration for MemphisInvest.com explains that these investors have changed strategy. They are looking to buy and hold, not buy and flip:

“But the more important takeaway, he said, is that the investors said they plan to hold their rental properties five to 10 years; one-third said they plan to hold them more than 10 years. What investors are going for now – the buy and hold for long-term gain – has always been my general advice to buyers. But now that more people are doing it, my clients have to face more frustration than they did before this new wave of investment-buyers jumped in.”

I am validated by seeing that this is a national trend. But, it doesn’t make me happy.